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Motorists are likely to face increased car tax expenses this year as the government implements significant reforms to Vehicle Excise Duty (VED), marking the most substantial overhaul in nearly a decade. These changes, impacting both new and existing car owners, necessitate understanding the updated car tax rates.
Vehicle Excise Duty (VED) Overhaul: What Motorists Need to Know
The upcoming changes to VED represent the most comprehensive adjustments since April 2017. Starting April 1, 2025, significant alterations will impact owners of petrol, diesel, electric, and hybrid vehicles.
- Buyers of new petrol and diesel cars will experience a doubling of first-year VED rates.
- Electric vehicle (EV) owners will see the end of their car tax exemption and will become liable for VED payments.
These modifications mean that the majority of car owners will experience the effects of these tax adjustments. This article details how these VED increases will affect different categories of vehicle owners based on car age.
Significant changes to car tax are being implemented by the government.
New Car Tax Rates for Vehicles Purchased After 1 April 2025
Upon purchasing a new car, drivers are required to pay a first-year car tax rate, often referred to as ‘showroom tax’. This levy is calculated based on the vehicle’s carbon dioxide (CO2) emissions, with higher emissions incurring greater costs. This initial tax is generally included in the purchase price. The most significant increases are applied to these first-year car tax rates.
The Autumn Budget confirmed the doubling of first-year VED rates for all new petrol and diesel cars, and many hybrids, starting 1 April 2025. Experts have characterized this as an impactful tax on combustion engine vehicles.
Electric vehicles will no longer be exempt; however, new zero-emission models will attract a minimal £10 showroom tax. This reduced rate will remain until 2029-30 as part of government incentives for greener vehicle adoption. Ending car tax exemptions for EVs, however, may lead to increased expenses for buyers in the long term as electric cars become subject to additional taxes.
Expensive Car Supplement for Electric Vehicles
Electric vehicles purchased for over £40,000 will be subject to the ‘expensive car supplement’ for five years, in addition to the standard rate. The end of VED exemption for electric cars, originally announced to promote fairness, will result in new EVs exceeding £40,000 incurring the same expensive car supplement (ECS) as premium petrol and diesel models from April 1, 2025.
This premium tax, introduced in 2017, applies to cars with a list price exceeding £40,000 and is levied for five years, from the second to sixth year of ownership. The ECS, which has increased to £425, is added to the standard rate, resulting in an annual tax of £620 for owners of more expensive vehicles. With a significant proportion of new EVs expected to cost over £40,000, many owners may face this £620 annual VED expense from 2026 to 2031.
While showroom tax for electric vehicles remains very low, buyers of combustion engine vehicles will face considerably higher first-year car tax costs. The smallest increase is £100 for new cars emitting 1 to 75g/km CO2, primarily affecting plug-in hybrid vehicles (PHEVs), but first-year VED rates have doubled for all new cars emitting over 76g/km CO2.
| Fuel type | Standard tax rate for cars costing less than £40,000 | Increase | Standard tax rate for cars costing more than £40,000 | Increase |
|---|---|---|---|---|
| Petrol, diesel, hybrid and electric cars | £195 | £5 for petrol and diesel cars, £15 for hybrids, £195 for EVs | £620 | £15 for petrol and diesel cars, £30 for hybrids, £620 for EVs |
| *models with a ‘list price’ (the published price before any discounts) of more than £40,000 to pay an additional premium tax of £425 for the first 5 years of the standard rate | ||||
| Emissions (g/km) CO2 | First-year VED for new petrol, diesel, hybrid and electric cars | Increase |
|---|---|---|
| 0 | £10 | £10 |
| 1-50 | £110 | £100 |
| 51-75 | £130 | £100 |
| 76-90 | £270 | £135 |
| 91-100 | £350 | £175 |
| 101-110 | £390 | £195 |
| 111-130 | £440 | £220 |
| 131-150 | £540 | £270 |
| 151-170 | £1,360 | £680 |
| 171-190 | £2,190 | £1,095 |
| 191-225 | £3,300 | £1,650 |
| 226-255 | £4,680 | £2,340 |
| Over 255 | £5,490 | £2,745 |
Impact on Hybrid and Economical Cars
Hybrid cars with emissions between 76-90g/km CO2 now face a showroom tax of £270, increased from £135. New vehicles emitting 91-100g/km CO2, such as the Toyota Yaris hybrid, are now taxed at £330 for the first year, up from £195. Other economical new cars emitting 101-110g/km CO2 also see a first-year tax increase to £390 from £195.
Families purchasing a new 1.3-litre mild-hybrid petrol Nissan Qashqai (144g/km CO2 emissions) will pay £540 in first-year car tax, an increase from £270.
Toyota Yaris hybrid owners will now pay £330 for first-year VED, previously £165.
Nissan Qashqai mild-hybrid petrol models now incur £540 first-year VED, up from £270.
Increased Taxes for High-Emission Vehicles
Owners of the most polluting vehicles will experience the most significant financial impact. Showroom tax for petrol and diesel cars emitting 191-225g/km CO2, like a mild-hybrid diesel Range Rover (194g/km), has risen to £3,300 from £1,650. First-year VED for vehicles emitting 226-255g/km CO2, such as the BMW M4, is now £4,680, up from £2,340. The steepest rise affects cars with CO2 emissions exceeding 255g/km, incurring a first-year tax of £5,490, a substantial increase from £2,745.
Models affected include the Ford Mustang and V8-engined Land Rover Defenders, Range Rovers, and Range Rover Sports.
Range Rover mild-hybrid diesel models now face £3,300 showroom tax.
BMW M4 car tax for the first year is now £4,680, up from £2,340.
Ford Mustang models registered after 1 April now cost £5,490 to tax.
Car Tax for Vehicles Registered Between 1 April 2017 and 31 March 2025
For cars registered between 1 April 2017 and 31 March 2025, the standard car tax rate, applicable from the second year, has also increased for all fuel types including hybrids and electric vehicles. Aligned with the Retail Price Index (RPI), it has risen from £190 to £195 annually.
VED for Cars Registered Between 1 March 2001 and 31 March 2017
For petrol and diesel cars registered between March 2001 and March 2017, VED remains categorized into lettered bands (A to M) based on CO2 emissions. With the electric vehicle exemption removed, owners of older electric cars registered over eight years ago will now pay £20 annually in VED. This also applies to ultra-low emission hybrid, petrol, and diesel models emitting below 100g/km CO2.
RPI-linked increases will affect vehicles emitting over 121g/km, with annual VED costs rising between £5 and £25. The most polluting models (over 255g/km CO2) will incur an annual car tax of £760.
| VED Band | CO2 emissions (g/km) | Standard tax rate for petrol, diesel, hybrid and electric cars | Increase |
|---|---|---|---|
| A | Up to 100 | £20 | £20 |
| B | 101-110 | £20 | £0 |
| C | 111-120 | £35 | £0 |
| D | 121-130 | £165 | £5 |
| E | 131-140 | £195 | £5 |
| F | 141-150 | £215 | £5 |
| G | 151-165 | £265 | £10 |
| H | 166-175 | £315 | £10 |
| I | 176-185 | £345 | £10 |
| J | 186-200 | £395 | £10 |
| K* | 201-225 | £430 | £15 |
| L | 226-255 | £735 | £25 |
| M | Over 255 | £760 | £25 |
| *Includes cars emitting over 225 g/km registered before March 23, 2006 | |||
Increased Vehicle Tax for Cars Registered Before 1 March 2001
Owners of cars older than 24 years, registered before 1 March 2001, will also experience higher car tax costs this year. VED for these vehicles is divided into two bands based on engine size: up to 1.55 litres and over 1.55 litres. For the lower engine size category, the annual increase is £10, raising the tax from £210 to £220. For larger engine capacities, a £15 increase has been applied, bringing the tax from £345 to £360 starting 1 April 2025.
| Engine size | Standard rate* for petrol and diesel cars | Increase |
|---|---|---|
| Up to 1549cc | £220 | £10 |
| Over 1549cc | £360 | £15 |
Exemption for Vehicles Over 40 Years Old
Vehicles registered over 40 years ago are exempt from car tax under VED regulations. This historical vehicle taxation exemption currently applies to all cars registered before April 1985. Vehicle keepers must apply to the DVLA for a vehicle tax exemption to update their log book and officially recognize the vehicle’s eligibility for charge-free historic vehicle tax. Application details are available on the Gov.uk website.